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Chapter Business Guidelines
- Executive, Administrative, and Advisory Services
- Chapter Treasurer Position Description
- Internal Control Procedures
- Appendix A: Financial Information Needed for Chapter Group Tax Filing for Federal Form 990
- Appendix B: Table of Chapter Services and FEIN #s
- Annual Costs and Fees
The Guidelines were developed by the Chapter Council Work group on Chapter/MLA Business Relations and MLA headquarters staff. The purpose of the Guidelines is to:
- define fundamental business relationships among MLA and its independent chapters
- describe MLA's position on administrative and fiscal polices relating to chapters
- promote sound business and financial practices among chapters
This manual is updated periodically by the director of Financial and Administrative Services. Readers are encouraged to send suggestions for changes and updates to MLA headquarters.
The legal relationship among the chapters and the Medical Library Association, Inc. (hereafter referred to as the Association) is defined by the Association's bylaws, history, and culture. While it is the practice of the chapters and the Association to work together and be closely affiliated, from a legal perspective the chapters and the Association are separate legal entities.
In accordance with good business practice, chapters should be incorporated. The main difference between an unincorporated chapter and an incorporated chapter is that of ultimate liability of the membership of the chapter for any debts or other legal obligations of the chapter. The most compelling reason to incorporate is to shield chapter members from personal liability for chapter obligations. Chapter incorporation also shields the Association and the other chapters from liabilities, should a chapter become involved in legal action.
Federal Tax Status
State Sales Tax
MLA Chapters are classified by the IRS a 501(c)(3) which is the same classification as MLA. This designation provides many benefits such as exemption from Federal income tax and often state income tax. Unfortunately 501(c)(3) does not automatically qualify the chapter to be exempt from state sales tax on purchases made by the chapter.
Each state sets its own regulations for state sales tax. Chapters can obtain exemption from sales tax by applying at states where it makes purchases. In some states obtaining exemption will be easy and in others it will be difficult or impossible. Treasurers may begin the process by searching the Internet. Most states describe the application process in their official state web sites.
Federal Employer Identification Number
In accordance with good business practice, each chapter should have a Federal Employer Identification Number (FEIN). This number is most commonly used to open a bank account and file tax returns. It has the same function as a social security number for an individual, but in this case it is for a group. Note: When a chapter becomes a corporation, it will need to apply for a new FEIN number as a corporation. The material in Appendix A provides for this.
Each chapter has financial responsibility for its operations, including but not limited to, responsibility for administrative and advisory services, information services for the chapter membership, support services for the governing body of the chapter, chapter business meetings and programs, and chapter publications. Chapters should not enter into financial commitments that exceed current reserves.
Income Generating Activities
Executive, Administrative, and Advisory Services
The Association will provide to each chapter executive, administrative, and advisory services requested by such chapters and approved by the Association's Board of Directors. The Association reserves the right to assess chapters fees for any or all services. The Association will endeavor to provide advance notice of fees and to set fees at a level that is fair. Current services are described below.
Association Member Lists
To assist chapters, the Association offers a group incorporation process in the State of Illinois. This "group" approach reduces the cost and complexity to initially become incorporated. The association provides support for the annual report to the state.
Group Insurance Program
At the September 1994 MLA Board meeting, the Board of Directors approved the following motion:
MOVED, that in October 1994,
MLA headquarters staff respond to the Chapter Council's motion by making certain insurance services available for chapters. The new service shall provide chapters the opportunity to obtain general liability and Director & Officer insurance through MLA.
The cost for each policy shall equal the incremental increase in premiums charged by the insurance company plus 50% of the cost as an administrative fee payable to MLA. The fee will be used to support the service and provide partial compensation for MLA for the reduced value of its polices by sharing coverage limits with participating chapters.
General Liability Insurance
General liability insurance will appeal most to those chapters that have significant assets to protect or host meetings at facilities that require this insurance as a condition using the facilities.
General liability insurance protects a chapter from lawsuits rising from alleged negligence on the part of the chapter and its general operations. It includes liability protection for bodily injury (athletic events excluded) and property damage that is a result of the chapter's activities. Examples of the types of lawsuits covered by general liability insurance include:
- A claim for damages for injury sustained by a visitor while at a chapter activity.
- A claim for property damages by a hotel after a fire breaks out in meeting rooms.
- A claim for damages resulting from the actions of a chapter member who visits a hospitality suite during a meeting, becomes intoxicated, and injures another person while driving home.
The group general liability insurance provides an aggregate limit of $2,000,000 in coverage and an each occurrence limit of $1,000,000. MLA and the participating chapters will share these annual limits. The cost for a chapter to participate is shown on the Table for Chapter Services. The cost for a chapter to purchase its own policy would cost more than the shared policy.
How to Request Proof of Insurance for a Meeting
MLA Staff will arrange for the insurance company to send a rider to the meeting facility as proof of coverage. To request this please fax your request to 312.419.8950 with a copy of the facility contract, which needs to show the following:
- Date(s) of use
- Facility name and address
- Chapter Name
- The contract paragraph that addresses insurance requirements
- Name and fax number where the insurance company should fax the rider. (The rider will name the facility and specific dates and is sent direct to your facility contact person by the insurance company.)
Professional Liability Insurance
Professional liability (D&O) insurance protects chapter officials (officers, volunteers, and committee members) in the course of carrying out their responsibilities on behalf of the chapter. This is malpractice protection for errors and omissions of management actions. Examples of the types of lawsuits covered by professional liability insurance include:
- A claim of violation of civil rights
- A claim of breach of duty regarding adequacy of funding mechanisms.
- A claim of breach of duty regarding establishing and meeting goals.
- A claim of fiscal mismanagement in the areas of expenditures and investments.
The group professional liability insurance provides an annual limit of $1,000,000 in coverage. MLA and the participating chapters will share these annual limits. The cost for a chapter to participate is shown on the Table for Chapter Services. The cost for a chapter to purchase its own policy would cost more than the shared policy.
MLA's group insurance program operates on a calendar year cycle, January 1 to December 31. Entry or exit from the program must be done prior to the start of the new calendar year, i.e., January 1. A chapter may join for a future calendar year by sending MLA written notice to this effect prior to January 1.
Group Tax Exemption
Currently, the association is offering group exemption process whereby the association prepares a group tax return for the chapters who desire this service. This will require that chapters provide financial information for the Association to complete the tax return. See Appendix A below.
Chapter Treasurer Position Description
The treasurer (or other person as designated by the bylaws) shall serve as custodian of the chapter's funds, maintaining these funds in a bank and dispersing them at the direction of chapter officers.
- Receive chapter dues remittance checks and other income due the chapter.
- Prepare a budget with the assistance of chapter officers.
- Assist with the periodic review (audit) of chapter financial records.
- Maintain the chapter's bank account, and control cashbooks and check register.
- Maintain a system to document approved disbursements.
- Prepare periodic financial reports.
- Monitor expenditures to maintain a financial balance, which allows the chapter to be progressive without overspending.
- Retain and maintain financial records in accordance with retention schedules and forward to the incoming Treasurer.
Note: Chapters may choose to allow the treasurer to delegate some or all of the above activities however, delegation does not relieve treasurers of their responsibility as custodians of the chapter's funds.
Internal Control Procedures
Sound financial management is essential to the effective operation of every organization. One important aspect of good financial management relates to an organization's procedures to handle its financial and business activities. These procedures are often referred to as internal controls. Chapters with good internal control systems gain several benefits including:
- Complete financial information will be available to those who need it for decision making.
- Finances are managed within budget limits and in accordance with chapter polices and guidelines.
- The following internal control procedures can be implemented in even the smallest chapters.
- Record transactions using a chart of accounts.
- Approve expenditures and financial commitments (e.g., contracts) according to clear lines of authority.
- Maintain and follow written expense reimbursement policies.
- Prepare annual budgets and compare them to financial reports and investigate unusual variances.
- Distribute regular and routine financial reports.
- Involve chapter officers in financial matters.
- Periodically, appoint a person to conduct an independent review (audit) of financial records. (Ideally, this should occur at least every two years).
Most chapters will find it cost prohibitive to hire a CPA to audit their financial records. However, the chapter may ask a member (or other qualified person) to conduct an independent review the "Books."
The review should include looking at the past year's bank statements, budgets, and financial reports to determine if:
- Cash and checks are deposited promptly into the chapter's bank account;
- Timely bank reconciliations are conducted;
- Paid expense reports and invoices have the proper authorizations and account numbers, and none are unpaid or paid twice;
- All disbursements and prenumbered checks are recorded;
- Totals for the checking account and the financial statement agree; and
- Recorded balances in financial statements are compared with budgeted amounts periodically and unusual relationships investigated and explained to chapter officers.
Certain records are required for financial purposes, some for historical significance and others to maintain daily activities. Minimum retention periods for financial records are as follows:
- Bank Statements and canceled checks—7 years.
- Bank signature cards and account records—3 years after they are out of date.
- Contracts—3 years after the end of the contract.
- Incorporation Certificates—indefinite period.
- Mailing permits—indefinite period.
- Other financial reports, bills, expense reports, and correspondence—3 years.
- Tax Exemption Letter—indefinite period.
Appendix A: Financial Information Needed for Chapter Group Tax Filing for Federal Form 990
Download an MS Word version of Appendix A.
Medical Library Association Inc.
Chapter Group Tax Filing for Federal Form 990
Return of Organization Exempt From Income Tax
For the Calendar Year Ending December 31, 20____
Please complete the following information and send them to:
Director of Finance, Medical Library Association, 65 E. Wacker Place, Suite 1900, Chicago, IL 60601; fax 312.419.8950; email email@example.com.
If you have questions or if you are not the chapter treasurer, please contact Ray Naegele, director of finance, 312.419.9094 x17; email firstname.lastname@example.org.
Federal Employer Identification Number (FEIN): ________________________________
Prepared By (signature): ___________________________ Date:_____________________
Phone: ________________________ E-mail: _____________________________________
By returning this form the chapter authorizes MLA to include it in the group return for Federal reporting purposes. MLA will consider the information provided to be true and complete. For communications with the IRS, we will use MLA headquarters mailing address to avoid frequent address changes.
at January 1, 20___*
at December 31, 20___
|Cash and non-interest bearing accounts|
|Savings, money market, and other bank accounts|
|Investments, e.g., bonds, stocks, etc.|
|Other assets describe below:|
* It is important that the Beginning Balance above equal the Ending Balance from last year. Contact MLA HQ if you need a copy of your chapter's Account Balances from last year.
Chapter Name: ____________________________________________
Revenues and Expenses
For Calendar Year January 1 to December 31, 20___
|1e||Government Grants (Contributions)|
|1f||Other Contributions and Donations (for each donation of $5,000 or more attach a list of the donor's name, address, and amount)|
|2a||Annual Meeting Revenues|
|2b||Continuing Education Revenues|
|2c||Publication Revenue from Subscriptions and Ads|
|2d||Sales of Products|
|3||Investment Income (including dividends, interest, and other similar amounts)|
|11||Miscellaneous Revenue (describe below)|
|Total Income Received During the Year|
|2||Awards and Scholarships (attach a list of the purpose, amount, name, and address of recipients)|
|12||Advertising and Promotion|
|14||Information Technology Fees|
|18||Travel or Entertainment for Public Officials|
|19||Annual Meeting or Conference Expenses|
|19||Continuing Education Expenses|
|Contributions and Donations Paid Out|
|24||Other expenses (describe below):|
|Total Expenses Paid for the Year:|
Appendix B: Table of Chapter Services and FEIN #s
General Liability Insurance
Prof. Liability Insurance
Group Exemp. Federal Income Tax
Federal Tax Id Number [FEIN]
|2||Medical Library Group of Southern California and Arizona||Yes||Yes||IL||4/12/95||Yes||95-3000344|
|6||New York/New Jersey||Yes||Yes||NY||1/26/78||Yes||13-2945779/
|7||North Atlantic Health Sciences Libraries||Yes||Yes||CT||1983||Yes||22-2589873|
|8||Northern California and Nevada Medical Library Group||Yes||Yes||IL||4/12/95||Yes||94-6123372|
|13||Upstate New York and Ontario||Yes||Yes||IL||4/21/95||Yes||16-1170906|
Annual Costs and Fees
- General Liability Insurance: $116.67
- Professional Liability Insurance: $289.98
- Group Federal Tax Exemption 990 filing: $100.00